The Nifty50 recovered around 100 points from the day's low to end at a record closing high on December 18 yet again and formed a Dragon Fly Doji pattern on the daily charts.
IT and pharma stocks provided strong support to the market but the selling in some banking & financials, auto and metals stocks capped the gains.
A Dragonfly Doji pattern signals indecision among traders but also shows that the bulls managed to bring the index close to the opening level. The index has to clear the immediate hurdle of 13,800 for the bullish sentiment to continue.
The index gained 1.8 percent during the week and formed a bullish candle on the weekly charts as the closing was higher than the opening level.
Given the consistent rise for seven consecutive weeks, experts advised caution but said the index could continue rising towards the 14,000-mark.
Though there are no negative signs, traders should exercise utmost caution and maintain a tight stop loss below 13,650 on a closing basis and ride the upward momentum, Mazhar Mohammad, Chief Strategist, Technical Research & Trading Advisory, at Chartviewindia.in, said.
The Nifty50 opened marginally higher at 13,764.40 and turned volatile to hit an intraday low of 13,658.60. The index recouped losses in the last hour of trade to hit the day's high of 13,772.85 before signing off the session at 13,760.50, up 20 points.
"The bulls continued their saga of buying intraday dips owing to which the Nifty smartly recoiled from the day's low of 13,658 before signing off the session with a Dragon Fly Doji kind of indecisive formation whereas on weekly charts a bullish candle with 326-point trading range is visible," Mohammad said.
With the week ending December 18, "the Nifty registered seven consecutive positive closes on weekly charts, which can be a cause for concern, hinting at an outlandishly bullish sentiment, though only a close below 13,650 can act as an harbinger of near-term weakness," he said.
If the bulls manage to push the index beyond 13,800, then the strength may get extended up to 14,000 levels, he said.
India VIX was down by 2.81 percent from 19.15 to 18.62. Overall, lower levels of volatility suggest that bulls are in control and any small decline could be bought in the market, Chandan Taparia of Motilal Oswal said.
On the options front, maximum Put open interest was seen at 13,000 followed by 13,500 strike, while maximum Call open interest was at 13,000 followed by 14,000 strike. Marginal Call writing was seen at 14,000 then 14,200 strike while Put writing was seen at 13,700 then 13,500 strike.
The options data indicated that the Nifty could see an immediate trading range of 13,500 to 14,000 levels.
The Bank Nifty opened flat at 30,841.85 and failed to hold above the previous day's close of 30,847. The index remained under pressure for the most part of the day. It witnessed some profit-booking during the day and corrected towards key support of 30,350.
It witnessed a recovery of around 350 points to close 132.30 points lower at 30,714.70 but formed a bearish candle on the daily scale.
"The Bank Nifty has to continue to hold above 30,500 to witness an upmove towards 31,000 then 31,200, while on the downside, supports are seen at 30,350 then 30,200 levels," Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
Positive setup was seen in Pidilite Industries, Page Industries, Dr Reddy's Labs, Cummins India, Biocon, Infosys, Bajaj Auto, Titan, Asian Paints and Cipla, while weakness was seen in RBL Bank, Bharti Infratel, Shriram Transport Finance, Maruti Suzuki and Petronet LNG, he added.